I have noted over the past couple of months that the world is a pretty tense place right now. It also seems like there are a lot of entities that are using fear tactics to further their own agenda. What should we really concern ourselves with and what is merely smoke and mirrors?
We will never know what is real until after the fact so the best way is to keep things in context. One of my mentors gave me some great advice: "You can tell yourself this in the morning…All but once, the world is not going to end today". It is a bit facetious, but it's a valuable lesson.
If you simply watch television (financial or mainstream), surf the Internet, etc. you may think otherwise. There is always a story that is going to change EVERYTHING! Iran, Syria, Russia, Ukraine, Ebola, ISIS, Hong Kong protests - take your pick. It's true that it's not like the world is holding hands singing Kumbaya right now, but if you have ever read a history book, I don't know that it ever has. Our access to information (valid or inflated) is unparalleled at this moment. The illusion of safety certainly existed in years or generations past. I am not sure the world is inherently a more or less dangerous place but I do know that you will exhaust yourself and probably your trading account chasing every news story like Chicken Little.
Yes, stories can move the market for a longer time horizon. Look at the bonds. On Friday, Bill Gross's shocking departure from PIMCO caused roughly $10 billion of redemptions.
Still, allow yourself to be objective and let the actual market where people put their money where their mouth is be your barometer. But ultimately remember, at the end of the day, this is a rigged market and there's a big mouth with a whole lot of money trying to keep everyone smiling.
The markets rebounded strong on Friday, with a lot of profit taking at the end of the week. While the DJI and SPX responded to buying, the COMP faced some heavy suppression from sellers. The COMP remained the weakest of the three major markets, which leads me to believe there could be some more downside weakness. It will be interesting to see if we open down this morning. If that is the case, you will want to see immediate buying. If we do open in positive territory, we will need to see a gap fill bounce, or an immediate rally from the opening bell. Otherwise we fall in danger of another sharp drop to start the week.
Markets change. Traders have to change with them. You cannot be a one trick pony. What was your bread and butter 15 years ago, probably is not working today. Just ask the many "day traders" from the late 1990's and early 2000's who all thought they were geniuses because they could buy basically any tech stock and double their money within months. We constantly are refining our methodology to reflect where the greatest opportunity for profit is. First, you have to look at a reasonable time frame. You cannot discern anything (good or bad) from a few days worth of trading results. It's perfectly valid to look at your activity for the month. The most important thing is the big picture though. Let's say that you are quite profitable for the year but this month you are down. The question you have to ask yourself is "am I doing anything differently that could have caused this?" If the answer to this is no, then just keep doing what you are doing and chalk it up to chance. If you find yourself straying in your methodology, this is the perfect time to correct yourself.
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Keep a civil tongue.